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33 (128) 2018
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Real Estate & Construction

Warsaw office market awaits spectacular skyscrapers

by Hanna Dąbrowska, Research Department, Savills
Header h.d browska

 

The office market in Warsaw is very active. It won’t slow down this year despite the fact that there will be fewer new projects in 2018 than in previous years.

 

But the market awaits new spectacular developments to be delivered in 2019-2020.

Supply of office space across Poland's capital stands at 5.32 million m². Another 812,000 m² of office space is under construction, of which 227,000m² is expected to be delivered in 2018. New projects planned for 2019-2020 include high-rise buildings such as Varso, the Warsaw Hub, Mennica Legacy Tower and the tower building at Generation Park. Apart from skyscrapers, the office market in Warsaw is looking forward to new mixed-use, post-industrial developments such as Browary Warszawskie, Art N and EC Powiśle.

Total letting activity in Warsaw in 2017 reached 820,100m² of office space, up by 9% year-on-year and the second-highest result ever recorded in Warsaw. In 2017, lease renewals accounted for 26% of total take-up whereas the volume of pre-leases totalled 136,900m² (17% of volume of letting activity). The share of pre-leases was at the same level when compared with 2016. Expansions accounted for 11% of the total take-up (91,500m²).

Letting activity in the two central zones CBD and City Centre accounted for 45% of total volume, whereas the volume recorded in Służewiec stood at 160,500m² (or 19.6% of gross take-up), up 19% year-on-year. The popular 'Mordor' office district in Służewiec is still facing some issues as infrastructure developments are still ongoing along ul. Marynarska St., but new residential developments are making Służewiec vibrant after hours. The area is trying to regain its strong position on the office market. Vacancy rate in Służewiec decreased slightly over the last 12 months despite new projects being completed and demand for office increased by 19% y-o-y.

Overall vacancy rate in Warsaw decreased to 11.7%, 120 basis points lower when compared to the previous quarter and 260 bps lower when compared with 2016. The highest vacancy rate was recorded in Żwirki i Wigury corridor (23%). The lowest rate of 3.3% was seen in the North zone, which is one of the smallest in terms of office supply. The lowest vacancy rate in established office hubs at 9% was recorded in the two central zones and Jerozolimskie Corridor.

Prime rents in projects located in the CBD and City Centre range from €21.00m²/month up to €25.00m²/month in top floors in tower buildings. Prime rents in non-central location in the best buildings range between €13.00 and €14.50m²/month.

One of the key trends observed on the office market in Warsaw is the rise of flexible work spaces, with new brands entering the market and those already present expanding their operations. Also hotel operators became active taking or adapting part of the office building into hotel accommodation (Warsaw Hub will host a Crowne Plaza and a Holiday Inn Express; Indigo opened in Smolna 40 and Ibis Styles in Grzybowska 43).

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